Aeropostale files for bankruptcy protection

Retailer to shut all Canadian stores, 113 U.S. outlets amid struggles to keep up with fast-fashion firms

LOS ANGELES— Aeropostale Inc. filed for Chapter 11 bankruptcy protection on Wednesday, the latest in a wave of teen retailers that have struggled to adapt to changing fashion trends.

The New York-based apparel company will close 113 of its 739 stores in the U.S. and all 41 of its stores in Canada.

Going-out-of-business sales will begin on May 9 at the Canadian locations, while sales at the U.S. stores will kick off this weekend.

The company did not provide any details on how deep the discounts will be, or when the Canadian stores will ultimately close. It would not say how many jobs will be affected by its exit.

Retail consultant Maureen Atkinson told The Canadian Press that Aeropostale had faced stiff competition in Canada, vying for the same customers as other apparel retailers such as H&M, Forever 21 and Old Navy.

“They’ve always been at the low end of the price segment,” said Atkinson, who is with J.C. Williams Group.

“They really weren’t great stores and they weren’t really compelling. They didn’t have a personality.”

The retailer said it plans to emerge from Chapter 11 as a “stand-alone enterprise” with fewer stores and increased operating efficiencies.

In a statement, Aeropostale chief executive Julian Geiger said the company has “chosen to take more decisive and aggressive action to create a leaner, more efficient business that is well-positioned to compete and succeed in today’s retail environment.”

“Fast-fashion” outfits, with more-inexpensive clothes, have emerged in recent years to take a growing market share from Aeropostale, Abercrombie & Fitch and American Eagle Outfitters, stores that not so long ago dominated the retail sector.

Several long-standing retailers have announced they’re closing down or reducing their footprint in Canada in the past few years, including Le Château, Danier Leather, Mexx, Smart Set and Jacob.

“The teen-apparel space is obviously very difficult, very competitive when things were great,” said Simeon Siegel, senior retail analyst at Nomura Securities. “And over the last few years, things haven’t been great.”

Aeropostale was long seen as the value option for teens who wanted trendy animal logos on their polos, Siegel said. But as styles changed and prices plummeted, Aeropostale’s advantage decreased.

In 2013, it tried to reconnect with teens by announcing a design collection with social media star Bethany Mota that was focused on apparel and accessories.

“Bethany Mota with all of her social media following should have been the perfect representation,” Siegel said. “When a retailer brings on among the most popular social media presence in the world and is unable to drive the sales they need at a profitable rate, it exemplifies the issue that they’re facing.”

The company’s fourth-quarter net sales decreased 16.1 per cent to $498 million (U.S.) from $593.8 million a year earlier. Comparable sales decreased 6.7 per cent from a year earlier.

Once worth almost $2.6 billion, Aeropostale’s market capitalization has fallen to about $2 million.

The company’s shares traded for more than $30 six years ago. Two weeks ago, it was delisted from the New York Stock Exchange with shares having failed to break the $1barrier since last year. Shares on Wednesday were trading over the counter for less than three cents.

The company early this year said it would cut expenses by $35 million to $40 million annually and trimmed its corporate staff by 13 per cent, about 100 jobs.

As part of the Chapter 11 proceedings, Aeropostale has secured a commitment for $160 million in debtor-in-possession financing from Crystal Financial LLC.

The retailer also said it expects to honour all gift cards, have new store promotions and continue to pay suppliers and employee wages and benefits.

Some of Aeropostale’s peers seem to doing a better job of navigating choppy retailing waters. Abercrombie & Fitch, the epitome of logo-heavy fashion, experienced its own stumbles. And yet recently, it surprised Wall Street in the holiday quarter by posting its first increase in same-store sales in over three years. American Eagle Outfitters, too, has also seen improved sales recently.

“The majority of the blame for poor performance lies squarely with (Aeropostale’s) failure to realign itself to the changing fashion demands of younger shoppers,” said Neil Saunders, chief executive of the retail analytics firm Conlumino, in a research note.

“Against this backdrop, Aero has a brand and range that is ill-defined, somewhat dull, and rather out of tune with modern tastes.”